Articles by Ketan Sonalkar

Software & Services    
SECTOR | 23 Nov 2022
Tier-2 IT companies beat bigger players in key growth metrics
By Ketan Sonalkar

The IT industry has been one of the biggest wealth creators for investors over the last decade and helped generate a significant number of jobs, directly and indirectly. It is becoming a major sector in driving the services economy forward. While the focus is mostly on TCS, Infosys and HCL Technologies, the largest IT service companies in India, …

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ICICI Securities Limited released a Sector Update report for Software & Services on 24 Nov, 2022.
The Baseline    
16 Nov 2022
What did mutual fund managers buy in October 2022?
By Ketan Sonalkar

October of 2022 saw the benchmark indices Nifty 50 rise 5.37% and Nifty Bank 6.93%. Both of these indices are now trading close to their all-time highs. With such massive gains, it was not surprising that mutual fund managers chose to add up on banking stocks with potential returns. Some other sectors that saw buying were logistics, auto ancillary and speciality chemicals.

Samvardhana Motherson - Gets boost from revival in the auto sector 

Samvardhana Motherson, formerly known as Motherson Sumi, is an auto component manufacturer which supplies the global PV (passenger vehicle) industry with wiring harnesses, vision systems (mirrors) and plastic body parts.

Q2FY23 results were encouraging for the company with it registering its highest-ever quarterly revenues at Rs 18,354.8 crore. Considering the expanding market for EV components, the company has also taken steps to expand its production capacity. 

In September 2022, it acquired 100% stakes in Japanese company Ichikoh Industries at an enterprise value of Japanese Yen (JPY) 5.2 billion. The transaction includes Ichikoh’s mirror business (development and manufacturing of automotive mirrors and associated products) in Japan and China, catering largely to Japanese original equipment manufacturers (OEMs)

Fund managers who bought shares of Samvardhana Motherson

Fund managers who added shares of Samvardhana Motherson to their portfolios include Hiten Shah forKotak Equity Arbitrage Fund Growth, Sailesh Raj Bhan and Kinjal Desai for Nippon India Multi Cap Fund - Growth, Kinjal Desai and Ashutosh Bhargava for Nippon India Tax Saver (ELSS) Fund - Growth, and Sailesh Raj Bhan and Kinjal Desai for Nippon India Large Cap Fund - Growth.

Zee Entertainment - Growing market share and impending merger pique interest

Zee Entertainment is one of the largest listed media companies in India. It owns and operates 49 TV channels across 11 languages and also an OTT app Zee5.

In Q2FY23, the TV network’s viewership share was 16.4%, improving from 16.1% in Q1FY23, with a revised content strategy driving viewership in Hindi and Tamil. It also continues to gain viewership in Marathi among regional channels. 

Future growth triggers include higher adoption of OTT subscriptions under Zee5 and unlocking synergies with the proposed merger with Sony, for which the company has received conditional approval from the CCI. It expects the merger to be completed by Q4FY23.

Fund managers who bought shares of Zee Entertainment

Additional shares of Zee Entertainment were added by Sankaran Naren and Dharmesh Kakkad to ICICI Prudential Value Discovery Fund Growth, Mahesh Patil toAditya Birla Sun Life Frontline Equity Fund Growth, Sankaran Naren and Sharmila D’mello toICICI Prudential Focused Equity Fund Growth and Neelesh Surana and Ankit Jain to Mirae Asset Emerging Bluechip Fund Growth.

BHEL - Strength in order visibility over the next few years

BHEL, a public sector entity, is India’s largest engineering company and dominates the supply of equipment for power plants in India. The company’s products include gas turbines, generators, thermal sets, diesel shunters and other power plant equipment.

Its order inflow in Q2FY23 was robust at Rs 12,000 crore, with the announcement of the 2x660 NTPC Talcher win. Management expects revival of the thermal order pipeline with ~5 GW of expected annual order for the next five years. Order intake for the industrial segment was up 78% YoY to Rs 22,800 crore in Q2FY23, which included supply of locomotives and propulsion equipment in the transportation segment and transmission equipment among others.

Fund managers who bought shares of BHEL

Fund managers who added shares of BHEL to their schemes include Vinay Sharma and Kinjal Desai for Nippon India Focused Equity Fund - Growth, Krishan Kumar Daga and Arun Agarwal for HDFC Arbitrage Fund Wholesale Plan Growth, Atul Bhole and Laukik Bagwe for DSP Dynamic Asset Allocation Fund Regular Growth, and Venugopla Manghat and Praveen Ayathan for L&T Arbitrage Opportunities Fund Regular Growth.

IndusInd Bank - Improving performance this quarter aided by continual expansion

IndusInd Bank is part of the Hinduja Group. Its consumer finance division provides loans for vehicles, property and so on, while its corporate banking division offers a wide range of products to small and medium enterprises (SMEs) and large firms.

The bank posted a good set of numbers in Q2FY23. Its quarterly revenues were the highest ever at Rs 10,719.2 crore and net profits rose to Rs 1805.2 crore, a YoY increase of 57.4%. Gross NPAs also reduced significantly to 2.11% in Q2FY23.

IndusInd Bank continues to invest in physical and digital resources and has added 55 branches, 2,700 employees in banking and 3,650 employees in vehicles and microfinance and distribution this year. 

Fund managers who bought shares of IndusInd Bank

Addition of shares of IndusInd Bank was done by Hiten Shah for Kotak Equity Arbitrage Fund Growth, Priya Ranjan and Rahul Baijal for HDFC Top 100 Fund Growth, Priya Ranjan and Anil Bamnboli for HDFC Balanced Advantage Fund Growth, and Atul Penkar and Dhaval Gala for Aditya Birla Sun Life Tax Relief.

Canara Bank - Part of the PSU banks revival and growth story

Canara Bank is the third largest public sector bank in India. Among PSU banks, it has had a stellar run on the stock exchanges with its price nearly doubling in the past five months from the lows it made in June 2022.

Like many other PSU banks, Canara Bank also saw a significant improvement in its business over the past few quarters. In the latest quarter, Q2FY23, its revenues grew to an all-time quarterly high of Rs 27,358 crore, a YoY increase of 14.5%. Its net profit was also the highest in the past 10 quarters at Rs 2,705.6 crore, a YoY increase of 151.8%. Meanwhile, gross NPAs fell to 2.19% in Q2FY23 from 3.21% in Q2FY22.

Fund managers who bought shares of Canara Bank

Buying interest for Canara Bank came from Aniruddha Naha and Vivek Sharma forPGIM India Midcap Opportunities Fund Regular Growth, Sailesh Raj Bhan and Kinjal Desai Nippon India Multi Cap Fund - Growth, Mitul Kalawadia and Anand SharmaICICI Prudential PSU Equity Fund Regular Growth, and Vinay Sharma and Kinjal Desai Nippon India Banking & Financial Services Fund Growth.

RBL Bank - Bouncing back after a few lackluster quarters

RBL Bank, a private sector bank with a nationwide network of 435 branches, offers various services, including corporate and institutional banking, commercial banking, retail banking, agricultural development banking and financial market access.

It reported a 5.5x YoY jump in net profit to Rs 200 crore in Q2FY23, aided by a 63% decline in provisions. There was a pick-up in loan growth, up 12% YoY and 4% QoQ to Rs 62,900 crore. Within the retail lending segment, housing loans improved 35% QoQ and the MFI portfolio rose  22%. Credit cards grew at a steady pace of 4% QoQ. The share of credit cards stands at 23% of total loans.

RBL Bank has plans to launch its loan products for two-wheelers, used cars and Gold in Q3FY23. Overall, the bank is targeting a loan growth of 15% in FY23.

Fund managers who bought shares of RBL Bank

Fund managers who added shares of RBL include Kinjal Desai and Ashutosh Bhargava toNippon India Small Cap Fund - Growth, Kinjal Desai and Anand Gupta to Nippon India Arbitrage Fund Growth, Sonam Udasi and Abhinav Sharma to Tata Flexi Cap Fund Regular Growth, and Sanjeev Sharma and Vasav Sahgal to Quant Small Cap Fund Growth.

Delhivery - Path to profitability on the horizon

Delhivery, the largest fully-integrated logistics player in India by revenues, provides logistics services, including express parcel, e-commerce delivery and heavy goods delivery. Its network includes 122 gateways, 21 automated sort centres and 93 fulfilment centres.

In Q2FY23, its revenue from services was Rs 1,796 crore, up 22% YoY from Rs 1,474 in Q2FY22. Loss after tax in the same period narrowed down to Rs 254 crore from Rs 643 crore in Q2FY22. Overall, the company’s adjusted EBITDA loss reduced to Rs 125 crore in Q2FY23 on a sequential basis from Rs 217 crore in Q1FY23. As chances of profitability improve, there is growing interest in the stock from domestic institutions.

Fund managers who bought shares of Delhivery

Shares of Delhivery were added to respective portfolios by R Srinivasan and Mohit Jain for SBI Flexicap Fund Regular Growth, Priya Ranjan and Roshi Jain for HDFC Flexi Cap Fund Growth as well asHDFC Focused 30 Fund Growth, and Harish Bihani and Sharmila D’mello for ICICI Prudential Transportation and Logistics Fund Regular Growth.

Biocon - Acquisitions and international deals could improve company’s health

Biocon is a biopharmaceutical company. It develops therapy for chronic diseases such as autoimmune disease, diabetes and cancer. It has developed and introduced novel biologics, biosimilars, differentiated small molecules and affordable recombinant human insulin and analogues into the market. 

Biocon via its subsidiary, Biocon Biologics, will acquire the global biosimilars portfolio of Viatris. It expects the deal with Viatris to close in the second half of the current financial year. Through this deal, Biocon will gain Viatris’ global biosimilars business, whose revenues are estimated to be $1 billion next year, along with its portfolio of in-licensed biosimilar assets. This is an important deal for Biocon because it gives the Bengaluru-based company access to Semglee, an insulin brand.

The company also announced signing a strategic out-licensing agreement with Japanese pharmaceutical company Yoshindo Inc. for commercialising two of its pipeline biosimilar assets in the Japanese market. The company is in talks with Japanese regulators for data on two clinical assets and looks to commercialise the same across different markets.

Fund managers who bought shares of Biocon

Buying interest in Biocon was seen from Hiten Shah for Kotak Equity Arbitrage Fund Growth, Neelesh Surana for Mirae Asset Tax Saver Fund -Regular Plan-Growth, Sailesh Jain for Tata Arbitrage Fund Regular Growth, and Neeraj Kumar and Arun R for SBI Arbitrage Opportunities Fund Regular Growth.

Prestige Estates - Expanding footprint across the country

Prestige Estates is India’s largest developer in terms of booking value for FY22. Most of their projects are executed in Bengaluru and Hyderabad. The company has entered into Mumbai and NCR as well and is targeting aggressive growth in these geographies.

Prestige Estates has reported pre-sales in value terms at Rs 3,511 crore in Q2FY23, up 66% YoY. In volume terms, bookings increased to 4.55 million square feet (msf). Collections rose 68% YoY to Rs 2,603 crore in Q2FY23 and it launched five projects spanning 7.39 msf this quarter.

Fund managers who bought shares of Prestige Estates

Additions to respective schemes were made by Neelesh Surana and Ankit Jain to Mirae Asset Emerging Bluechip Fund Growth, Ankit Jain to Mirae Asset Midcap Fund Regular Growth, Neelesh Surana to Mirae Asset Tax Saver Fund -Regular Plan-Growth and Roshi Jain and Priya Ranjan toHDFC TaxSaver Growth.

Anupam Rasayan - Chemical company benefiting from China+1 factor

Anupam Rasayan is engaged in custom synthesis and manufacture of life science-related speciality chemicals in India. 

In Q2FY23, its operating revenue was Rs 31.07 crore, a YoY growth of 25%, while EBITDA was Rs 89.8 crore, a YoY growth of 29%. It also raised around Rs 500 crore through Qualified Institutional Placement (QIP) for growth capex in Q2FY23. Proceeds will be utilised for building multipurpose plants in existing units at Sachin and Jhagadia. A cash balance of Rs 192.1 crore in H1FY23 would be sufficient for the planned capex.

Fund managers who bought shares of Anupam Rasayan

Fund managers who added shares of Anupam Rasayan include Sanjeev Sharma and Vasav Sahgalfor Quant Active Fund Growth, Mahesh Patil and Dhaval Shah for Aditya Birla Sun Life Multi-Cap Fund Regular Growth, Satyabrata Mohanty for Aditya Birla Sun Life Equity Advantage Fund Growth, and Sandeep Manam and Akhil Kalluri for Franklin India Smaller Companies Fund Growth.

1 Comment
BalajiReddy Appreciate your great effort of compiling this useful information.
17 Nov 2022
A mixed bag: Lower growth, strategy changes at ICICI Prudential complicate outlook
By Ketan Sonalkar

ICICI Pru Life (ICICI Prudential Life Insurance Company) was the first among life insurance companies to declare their Q2FY23 results. It got a mixed reaction from analysts. The company chose to present its results based on half-yearly performance, and H1FY23 saw a lower growth rate compared to FY22.

A change in strategy drove strong growth in group protection and non-linked …

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Number of FII/FPI investors increased from 590 to 633 in Sep 2022 qtr.
HCL Technologies Ltd.    
19 Oct 2022
1128.20
-0.12%
HCL Tech beats estimates in Q2FY23, but a bumpy road lies ahead
By Ketan Sonalkar

HCL Tech is among India’s top five IT services companies, providing IT solutions, remote infrastructure management, BPO services, and engineering-related services. And its fortunes are closely tied to the global economy: the majority of its revenues come from customers in the US and Europe.

While the street was expecting IT services to have a muted Q2, actual results have so …

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HCL Technologies Ltd. has an average target of 1191.38 from 15 brokers.
The Baseline    
14 Oct 2022
Despite ‘September effect’, MFs make fresh buys in FMCG, Capital goods stocks
By Ketan Sonalkar

Traders often talk about the September Effect - that since 1928, indices have historically seen a decline during this month. And 2022 was no exception, as the benchmark Nifty index fell by 3.7% and retreated from the highs made in August. The month saw rising uncertainty around the Russia Ukraine war, and the US Fed and other Central Banks hiking rates to control inflation and the rise in oil prices. 

Despite this, mutual funds found buying opportunities in stocks that hold future potential. This month also saw a lot of recently launched schemes add stocks to their portfolios. This month's buys include a life insurance company, FMCG players as well as capital goods manufacturers.

This list is based on a screener where the mutual fund holding grew by a certain minimum percentage and at least four schemes bought more than a lakh of shares each.

HDFC Life - Tie up with group company to widen customer base

HDFC Life is one of India’s leading private life insurance companies and part of the HDFC Group. It has been gaining market share and also has better operating metrics than other private insurers.

In September 2022, it partnered with another group company,  general insurance player HDFC ERGO, to provide a combination of life insurance along with health insurance. This is expected to further widen its customer base. Another positive development for HDFC Life includes the approval of the merger of Exide Life with HDFC Life from the NCLT. 

Fund managers who bought shares of HDFC Life

Shares of HDFC Life were added to respective schemes by Mahesh Patil for Aditya Birla Sun Life Frontline Equity Fund Growth, Hiten Shah for Kotak Equity Arbitrage Fund Growth, Aniruddha Naha and A. Anandha Pabmanabhan for PGIM India Flexi Cap Fund Regular Growth as well as Vinay Sharma and Kinjal Desai for Nippon India Banking & Financial Services Fund Growth.

CG Power - Railway orders put the company on the fast track

CG Power (CG Power and Industrial Solutions) is a manufacturer and distributor of electrical equipment such as transformers, reactors, and other control equipment. It also manufactures industrial motors and pumps, and communication systems.

Indian Railways, which is undergoing dynamic growth in both freight and passenger transportation, has fueled CG Power with various opportunities for future growth. Indian Railways continue to give orders to CG Power for electrification, signaling system upgrades, and high horsepower locomotives. The company has also approved a capex of Rs 32 crore for the railway business. The motors business, which constitutes around 78% of the CG Power product portfolio, has also been issued a capex of Rs 80 crore.

Fund managers who bought shares of CG Power

Buying interest in CG Power saw addition to portfolios by Atul Bhole and Dhaval Gada toDSP Flexi Cap Fund Payout of Income Dist cum Cap Wdrl, Vinit Sambre and Resham Jain to DSP Midcap Fund Growth, Shridatta Bhandwaldar to Canara Robeco Flexi Cap Fund Growth and Atul Bhole and Vikram Chopra to DSP Equity & Bond Fund Growthschemes respectively.

Triveni Turbine - Robust demand and capacity expansion drive interest in the stock

Triveni Turbine is the domestic market leader in steam turbines up to 30 MW. The company designs and manufactures steam turbines up to 100 MW, and delivers end to-end solutions to customers. 

In Q1FY23 it registered a robust revenue growth of 40.7% to Rs 259 crore supported by 59% YoY increase in export business, while domestic business increased by 32% YoY. The management expects execution to pick up pace and to generate 35% top-line growth in FY23. This is backed by its expansion plans with the addition of a new bay in the Sompura plant. This is expected to augment the space for assembly and testing of steam turbines at the factory. The management expects this to be complete in Q2FY23 and post the expansion, the capacity will rise from 150-180 machines to 200- 250 machines per annum.

Fund managers who bought shares of Triveni Turbine

Fund managers who bought Triveni Turbines include Sohini Andani and Mohit Jain for SBI Magnum Midcap Fund Regular Growth, Mahesh Patil and Dhaval Shah for Aditya Birla Sun Life Multi-Cap Fund Regular Growth, Vishal Gajwani for Aditya Birla Sun Life Small Cap Fund Growth and Sudhir Kedia and Ravi Gopalakrishnan for Sundaram Flexi Cap Fund Regular Growthschemes respectively.

Dabur - Expanding product range and good monsoon to provide a boost

Dabur is one of India’s largest FMCG companies with a presence in segments like health supplements, oral care, hair care, home care and juices. Dabur also derives around 50% of its sales from rural regions with a presence in  90,000 villages.

Dabur introduced new products across categories in the past few months. These include the premium tea segment with the Vedik Tea brand. It has also entered a new segment of peanut butter. Dabur is also pushing its marketing strategy by hiring Amitabh Bachchan as their brand ambassador. Another factor favourable to Dabur is a good monsoon season which is expected to boost the rural economy, a major contributor to its sales.

Fund managers who bought shares of Dabur

Fund managers who added shares to respective schemes include Mahesh Patil for Aditya Birla Sun Life Frontline Equity Fund Growth, Yogesh Patil forLIC MF Large & Mid Cap Regular Growth andLIC MF Large Cap Fund Growth, and Hiten Shah forKotak Equity Arbitrage Fund Growth.

Sundram Fasteners - Rebound in the auto sector drives growth

Sundram Fasteners manufactures a range of high tensile fasteners for precision-driven sectors like Automotive, Wind Energy, Aviation, Farm Equipment and Infrastructure. They specialize in  cold extruded and precision forged parts used in two-wheelers, front wheel drive vehicles and internal combustion engines.

The company has planned a capex with fresh investments worth Rs 400 crore over the next two years as it sees bright prospects for the Indian automobile sector. The powertrain components division had won contracts worth Rs 150 crore for EV products in July 2022.

Fund managers who bought shares of Sundram Fasteners

Addition of shares of Sundram Fasteners was done by Harish Bihani and Sharmila D’mello to ICICI Prudential Long Term Equity Fund (Tax Saving) Growth andICICI Prudential Smallcap Fund Growth, Samir Rachh and Kinjal Desai to Nippon India Small Cap Fund - Growth and Vishal Gajwani to Aditya Birla Sun Life Small Cap Fund Growth.

Tata Chemicals - Strong leadership to be further strengthened with capacity expansion

Tata Chemicals is one of the top five players in the global soda ash market. The company  manufactures soda ash, sodium bicarbonate, cement, salt, marine chemicals and crushed refined soda along with other specialty chemicals. Basic chemicals form 75% of overall revenue while the rest comes from specialty products.

The company posted its highest ever quarterly revenues and net profits in Q1FY23. In the Q1FY23 results management commentary, they said that demand for soda ash is strong in spite of high prices. Demand is also robust from the detergent and glass industry. They expect better growth from solar panels to aid demand for the glass industry and thereby soda ash. 

The company has expansion plans with a capex of Rs 1,100 crore in progress where the capacity of soda ash will increase by 2.3 lakh MT, bicarb by 0.7 lakh MT and salt by 3.3 lakh MT.

Fund managers who bought shares of Tata Chemicals

Buyers of Tata Chemicals for respective schemes include Pankaj Tibrewal for Kotak Small Cap Growth, Kayzad Eghlim and Priyanka Khandelwal for ICICI Prudential Equity Arbitrage Fund Regular Growth, Sailesh Jain for Tata Arbitrage Fund Regular Growth and Neeraj Kumar and Arun R. for SBI Arbitrage Opportunities Fund Regular Growth.

Interglobe Aviation - Demand for air travel crosses pre Covid levels

Interglobe Aviation, more commonly known as Indigo is one of India’s low cost carriers (LCC) with a market share of 54% in the Indian aviation sector. 

The airline industry which was affected badly during the pandemic is now bouncing back in FY23. Indigo operated at a load factor of 80% in Q1FY23. The rising load factor was driven by a strong rebound in leisure & corporate travel. Further, international travel has normalised and has reached its precovid levels. 

Indigo in September also announced that it has entered freight services. Its first freight plane was one that was converted from a passenger plane. The freight carriers will be able to service markets between China in the east and the Gulf in the west, as well as the CIS countries to the north, according to the management. IndiGo also said it will be utilising the same pool of pilots and engineers that fly and service its current fleet for the cargo planes.

Fund managers who bought shares of Interglobe Aviation

Shares of Indigo were bought by Manish Gunwani and Kinjal Desai for Nippon India Growth Fund - Growth, Atul Penkar and Dhaval Gala for Aditya Birla Sun Life Tax Relief 96 Pyt of Inc Dis cum Cap Wdrl, Sailesh Jain for Tata Arbitrage Fund Regular Growth and Mahesh Patil for Aditya Birla Sun Life Frontline Equity Fund Growthschemes respectively

Syngene - New international deal to have significant long term impact

Syngene International serves pharmaceutical, biotechnology, nutrition, animal health, consumer goods and speciality chemical companies globally, with a range of integrated research services for the clinical development and manufacturing process.

Recently Syngene signed a 10-year biologics manufacturing agreement with leading animal health company, Zoetis. It will manufacture the drug substance for Librela (bedinvetmab), a monoclonal antibody used for treating osteoarthritis in dogs. According to the management, this agreement paves the way for development and manufacturing of other molecules in the coming years and is expected to be worth $500 mn to Syngene over 10 years, subject to regulatory approvals and market demand. 

Fund managers who bought shares of Syngene

Addition of shares of Syngene was done to respective schemes by Harish Bihani and Sharmila D’mello for ICICI Prudential Long Term Equity Fund (Tax Saving) Growth and ICICI Prudential Smallcap Fund Growth, Gaurav Misra for Mirae Asset Focused Fund Regular Growth, and Pranav Gokhale and Amit GanatraInvesco India Growth Opportunities Fund Growth.

Hatsun Agro Products - Expansion to a pan India brand drives revenue growth

Hatsun Agro Products manufactures and markets dairy products  like milk, curd, ice creams, dairy whitener, skimmed milk powder, ghee, paneer and other milk based products. The Q1FY23 results recorded highest ever quarterly revenues at Rs 2,020 crore. This was the result of expanding beyond its stronghold in South India.

While the company for most of its existence was limited to the southern states, its retail expansion in the last two years helped it reach customers in new markets like Maharashtra, Odisha, West Bengal and Madhya Pradesh. Hatsun Agro Products invested about Rs 450 crore in the last financial year across new manufacturing facilities for capacity expansion in ice cream, milk, curd, milk products and cattle feed.

Fund managers who bought shares of Hatsun Agro Products

Shares of Hatsun were added by S. Bharath and Ratish Varier to Sundaram Mid Cap Growth, Sohini Andani and Mohit Jain to SBI Magnum Midcap Fund Regular Growth, R. Srinivasan and Mohit Jain to SBI Focused Equity Fund Growth and Saurabh Pant and Mohit Jain to SBI Large & Midcap Fund Regular Payout Inc Dist cum Cap Wdrlschemes respectively.

Britannia - Management rejig and and international foray key positive triggers

Britannia, a leading food-products company, sells various brands of biscuits, cakes, dairy products, breads etc. in India as well as globally. 

The company recently teamed up with Nairobi-based Kenafric Industries to purchase Catalyst Capital-backed Britannia Foods Ltd. in Kenya in a $20 million transaction that also involved acquiring property and a plant, Mikul Shah, a director at Kenafric, said in an interview. Britannia Industries, unrelated to Britannia Foods, took a controlling stake in the partnership.

The company also saw a change in the top management team with Ranjit Kohli taking over from Varun Berry as the CEO, while Varun Berry was elevated to executive vice-chairman and managing director.

Fund managers who bought shares of Britannia

Buyers in Britannia included Sohini Andani and Mohit Jain for SBI Bluechip Fund Regular Growth, Sankaran Naren and Sharmilla D’mello for ICICI Prudential Focused Equity Fund Growth, Shridatta Bhandwaldar for Canara Robeco Flexi Cap Fund Growth and Neelesh Surana and Ankit Jain forMirae Asset Emerging Bluechip Fund Growthschemes respectively.

2731.55
0.13%
Defence stocks come into the spotlight
By Ketan Sonalkar

The Indian defence sector has only recently come to the notice of investors. For decades, the industry was closely controlled by the government, and the result was a clutch of highly bureaucratic public sector units manufacturing equipment, with low innovation and significant red tape. The sector lagged significantly behind the world in defence production. 

All of this has changed in …

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Number of MF schemes increased from 21 to 128 in Sep 2022 qtr.
Allcargo Logistics Ltd.    
26 Sep 2022, 11:43AM
467.45
0.83%
Allcargo Logistics sees gains from government's new logistics policy
By Ketan Sonalkar

Allcargo Logistics is one of the top logistics companies in India and a one-stop supply chain management solution that provides logistics solutions across 160+ countries. Allcargo's worldwide supply chain business (MTO division) is managed by ECU Worldwide. Its multi-modal transport business includes consolidation of less-than-container load (LCL), full container load (FCL), imports and exports forwarding, air freight, movement of project …

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Allcargo Logistics Ltd. has gained 54.35% in the last 6 Months
Other Financial Services    
SECTOR | 19 Sep 2022
Indian AMCs battle regulatory challenges and changing customer preferences
By Ketan Sonalkar

The last two decades have seen the phenomenal growth of the mutual fund industry in India. Within this industry, until a few years ago, there was only one listed player, Nippon AMC (Nippon India Life). The next one to get listed was HDFC AMC in 2018, followed by UTI AMC in 2020. The latest one listing on the market was ABSL AMC (Aditya Birla Sun Life) in 2021 and many more are expected to follow soon. 

As an investment theme, AMCs have seen growing interest from investors who want to  ride the rising wave of  financialisation of savings in India. However, this industry has faced several challenges in terms of regulations and changing customer preferences in  investing schemes. AMC stocks have performed poorly as a result in the last one year, and the performance of individual companies in Q1FY23 was lower YoY on key metrics. Part of this can be attributed to the fact that SEBI banned AMCs from issuing new NFOs (New Fund Offer) for three months from April to June this year.

Quick Takes

  • Among listed AMCs, HDFC AMC continues to be the most profitable with an operating profit margin of 74.7% in Q1FY23
  • HDFC AMC has the highest revenues among the listed players with 85% higher revenue than the nearest competitor at Rs 532.9 crore
  • Q1FY23 was challenging for the AMC industry due to the ban by SEBI on issuing new NFOs.
  • Another challenge was the high level of redemptions from equity funds in Q1FY23 following the downmove of the NIFTY50 to 15,000 levels in May.
  • AMCs are also trying to keep up with changing customer preferences, where a clear shift is seen towards investing in passive funds vs active funds

AMCs disappoint with weak performance along with a ban on NFOs

The underperformance for listed AMC stocks in Q1FY23 was seen due to subdued industry AUM growth, which fell by 2% sequentially. HDFC AMC, ABSL AMC also lost market share due to some of the newer AMCs gaining on the more established players. The three month NFO ban by SEBI only added to the industry's woes. In Q1FY23 MTM losses in equity schemes were worth Rs 1.9 lakh crore and net outflow in debt schemes stood at Rs 1.1 lakh crore, according to data shared by the AMC industry body AMFI (Association of Mutual Funds of India).

As a sector that was expected to deliver stellar returns to investors, AMCs have largely underperformed with all the AMC stocks delivering more than 30% negative returns in the last one year. HDFC AMC stock lost 41%, which was the highest loser in the group, while UTI AMC lost 30.6%.

A major development at HDFC AMC was the resignation of its star fund manager and long time CIO Prashant Jain after serving more than 20 years in the company. The AMC was swift in appointing replacements internally for schemes managed by him. The future performance of HDFC AMC depends on how the new team takes the mandate forward.

While the ban on NFOs is one factor, it cannot be entirely blamed for the lower YoY revenue growth of all the listed AMCs. Another factor to consider is that the AMC business is highly competitive and the number of AMCs is rising each year. The newer AMCs are highly aggressive in their strategies to acquire customers and this comes at the expense of the market share of the more established players. 

Investors shift from equity to debt as the indices decline in Q1FY23

Investor psychology has a major role to play in the inflows of equity MFs. Many investors, after witnessing phenomenal growth in 2021, pulled out of equity mutual funds as the market corrected in 2022. While the equity funds continue to be positive, they have moderated in recent months.

Going by the latest AMFI data, equity mutual funds saw a net inflow of Rs 6,120 crore in August 2022. This is the lowest inflow that equity funds have seen in the last 10 months. Equity funds saw a total inflow of Rs 8,898 crore in July, Rs 15,495 crore in June, Rs 18,529 crore in May and Rs 15,890 crore in April, this year.

On the other hand, debt mutual funds witnessed an inflow of Rs 49,164 crore in August, much higher than Rs 4,930 crore seen in July, this year. However, hybrid schemes saw a net outflow of Rs 6,601 crore and Gold Exchange Traded Funds (ETFs) experienced a net outflow of Rs 38 crore.

Changing customer preferences is also one of the key reasons for the YoY decline in profitability of the AMCs. Over the past few years, there is a much higher demand for passive funds compared to active funds - an accelerating shift that has happened globally as well. The revenue source for any AMC is the Expense Ratio that it charges for managing the scheme. The expense ratio for passive funds is much lower than active funds  as the fund manager only needs to replicate an index, while active funds require a team of analysts and fund managers who research and make decisions.

Passive funds take centre stage in investor choices

Passive funds have made inroads into retail portfolios in 2022 as leading mutual fund houses have started to devise products for passive investing and are coming up with varied themes and new investing strategies in the passive space. As a result, the assets managed by the passive funds have grown substantially in 2022 so far.

The AUM of passive funds including ETFs, index funds, gold ETFs and Fund of Funds was at Rs 4.72 lakh crore as on December 31, 2021. The AUM was at Rs 5.71 lakh crore at the end of July 2022, a 22% increase in 6 months. In comparison, debt mutual fund AUM decreased by 12%, and equity funds grew by 6% in the same period.

The popularity of equity passive funds among investors has surpassed their actively-managed counterparts in recent months, driven by sustained inflows from index schemes of mutual funds.

One of the hypotheses that make AMCs an attractive investment option is that they have higher profit margins as compared to other industries. In Q1FY23, the operating profit margins have been steady with the exception of UTI AMC, which lost operating profit margins YoY by 6.1%. HDFC AMC has the highest operating profit margins at 74.7% in Q1FY23. 

These margins are still impressive for an industry that has many regulations including expense ratios. SEBI has capped the expense ratios of active funds based on the size of their AUM (assets under management). The higher the AUM, the lesser the expense ratio. That is why AMCs are keen to keep introducing NFOs. At the time of introduction, their AUMs would fall under the highest expense ratio category. The three month ban on NFOs impacted profitability for AMCs as they were unable to issue any NFOs in Q1FY23.

With the ban lifted in July, more than 14 fund houses have launched over 17 schemes in July 2022. It is expected that inflows will increase from this month. Analysts believe that investors who suffered losses from crypto and direct equities will shift to mutual funds. 

With many AMCs launching NFOs in both the passive and active segments after the ban was lifted, indices are moving up to their previous highs, a reversal from the lows seen in May 2022. The next quarter is likely to see the performance of AMCs improve. However, they have a long way to go before they can deliver outperformance as an industry.

ICICI Securities Limited released a Sector Update report for Other Financial Services on 23 Nov, 2022.
Mutual Funds News    
TREND | 15 Sep 2022
Where is the smart money moving in August 2022?
By Ketan Sonalkar

The month of August saw theNifty 50 index rise by 3.5% to 17,760 levels, continuing an upward trajectory from the previous month. Manysectors bounced back after their recent fall in May, but became volatile this week after US inflation numbers have made another large interest rate hike from the US Federal Reserve increasingly likely. 

With the recent upward movement, mutual fund managers bought into sectors and stocks that are likely to be outperformers. Let’s look at some of the stocks which were bought by managers of mutual funds in August. These include a new-age tech stock, a bank, a cement company, and interestingly two small caps in the forging industry.

Zomato – Prospect of turning profitable drives fund manager interest

Zomato is among the new-age tech companies that listed on the stock exchange last year after certain norms were eased for tech companies. It made its stock market debut in July 2021 and saw its stock price fall to nearly a third of its listing price a year later in July 2022. However, over the last two months, the stock has seen an uptick and increasing buying interest from mutual fund managers.

This was largely driven by the fact that according to the Q1FY23 results, Zomato’s food delivery segment has hit break even with an adjusted EBITDA of 0. It registered an adjusted EBITDA loss of Rs 80 crore in Q4FY22. However, at the company level, it registered an adjusted EBITDA loss of Rs 150 crore in Q1FY23. Zomato continues to be a loss-making company and fund managers are bullish on the stock with hopes of the company becoming profitable sooner than anticipated.

Fund managers who bought shares of Zomato

The highest quantity of shares was bought by Mirae Asset AMC with additions to schemes by Neelesh Surana and Ankit Jain to Mirae Asset Emerging Bluechip Fund Growth, Gaurav Misra and Gaurav Khandelwal toMirae Asset Large Cap Fund Regular Growth, Neelesh Surana toMirae Asset Tax Saver Fund - Regular Plan-Growth, the next highest buying came from Nippon India AMC with largest allocation by Samir Rachh and Kinjal Desai toNippon India Small Cap Fund - Growthscheme.

Punjab National Bank - Joins the list of PSU banks reducing their NPAs

Punjab National Bank (PNB) is a leading Indian public sector bank with a vast network of branches and ATMs across the country. The bank has historically been plagued with growing NPAs, but the last few quarters saw the bank making an effort to reduce these.

In Q1FY23, the gross NPA level of the bank came down to 11.27% from 14.33% in Q1FY22. In fact, the Q1FY23 ratio is the lowest in the last ten quarters. The total advances grew 10.2% YoY to Rs 800,177 crore in Q1FY23, and retail credit rose 10.8% YoY to Rs 146,321 crore. Though the NPA levels are still high, the management expects to make a substantial recovery in the coming quarters.

Fund managers who bought shares of Punjab National Bank

Shares of PNB were added by Bhavesh Jain and Dhaval Dalal toEdelweiss Arbitrage Fund Regular Growth, Sailesh Jain toTata Arbitrage Fund Regular Growth, Milind Bafna toAditya Birla Sun Life Pure Value Fund Growth, Devender Singhal and Satish Dondapati toKotak Nifty PSU Bank ETFschemes respectively.

Max Healthcare - Regular operations pick up with the waning of pandemic

Max Healthcare is a hospital chain based in New Delhi. It operates hospitals in and around the national capital region, Punjab, Uttarakhand, and Maharashtra. 

With the waning of the pandemic over the past few quarters, the hospital chain saw its revenue rise from regular functions (non-Covid). In Q1FY23, regular revenues rose YoY by 17.8% to Rs 1,473 crore, while Covid-related revenues fell to Rs 2 crore in Q1FY23 from Rs 136 crore in Q1FY22. The company is also planning to add 2,800 beds on existing land bank over the next five years.

Fund managers who bought shares of Max Healthcare

Fund managers with growing interest in Max Healthcare include Abhiroop Mukherjee and Siddharth Bothra forMotilal Oswal Flexicap Fund Regular Plan Growth, Manish Gunwani and Kinjal Desai forNippon India Growth Fund - Growth, Priya Ranjan and Roshi Jain forHDFC Flexi Cap Fund Growth and Chirag Setalvad and Priya Ranjan forHDFC Mid-Cap Opportunities Fund Growthschemes respectively.

Ambuja Cement - Sustained demand and capacity expansion make a strong foundation

Ambuja Cements is engaged in the manufacture and sale of clinkers and cement. It has a cement production capacity of around 31.5 million tonnes. It recently changed ownership with the Adani Group acquiring it from multinational cement giant Holcim.

The company’s expansion projects are on track. It is adding cement grinding capacity of 1.5mtpa at Ropar (Punjab), a brownfield clinker capacity of 3.2 mtpa at Bhatapara, and a cement grinding unit of 7mtpa at existing Sankrail and Farakka. The growing demand for cement in real estate and infrastructure projects is one of the key factors that fund managers are placing their bets on cement stocks.

Fund managers who bought shares of Ambuja Cement

Shares of Ambuja Cement were bought for their respective schemes by Hiten Shah forKotak Equity Arbitrage Fund Growth, Abhiroop Mukherjee and Siddharth Bothra forMotilal Oswal Flexicap Fund Regular Plan Growth, Sanjeev Sharma and Vasav Sahgal forQuant Active Fund Growth and Vasav Sahgal and Ankit Pande forQuant Tax Plan Growth.

Sona BLW Precision Forging - Riding out the EV adoption in high gear

Sona BLW Precision Forgings is an Indian company, engaged in the manufacturing of precision forged bevel gears and differential case assemblies for automotive and other applications.

The company is establishing a significant presence in the EV (electric vehicle) space and in Q1FY23 won orders worth Rs 912.8 crore from a leading Indian EV and ICE two-wheeler manufacturer. It also won orders worth Rs 1,600 crore from an European PV and EV manufacturer. Its revenues from the EV segment have grown from 2% in FY20 to 29% in Q1FY23.

Fund managers who bought shares of Sona BLW Precision Forging

Fund managers who added shares of Sona BLW Precision Forging include Rama Iyer Srinivasan and Mohit Jain toSBI Multicap Fund Regular Growth, Dinesh Ahuja and Dinesh Balachandran toSBI Balanced Advantage Fund Regular Growth, Sohini Andani and Mohit Jain toSBI Bluechip Fund Regular Growth and Kinjal Desai and Ashutosh Bhargava toNippon India Multi Cap Fund - Growthschemes respectively.

LIC Housing Finance - Retail loans witness a massive growth

LIC Housing Finance is one of the largest Housing Finance companies in India and is a subsidiary company of LIC. 

In Q1FY23, 98% of disbursals were attributable to individuals and retail now contributes 82% to loans, as against 78% in Q1FY22. Disbursals were better as housing demand was robust. The company witnessed strong demand in southeastern, western, and southern regions. Management guided for 12-15% YoY growth in disbursals for FY23 while individual disbursals might also see similar growth. The outlook on construction finance is improving, and the current share of 5% may improve to 7-8% by year-end. 

Fund managers who bought shares of LIC Housing Finance

LIC Housing Finance saw buying by fund managers for respective schemes from Hiten Shah forKotak Equity Arbitrage Fund Growth, Sailesh Jain forTata Arbitrage Fund Regular Growth, Priyanka Khandelwal and Ihab Dalwai forICICI Prudential Large & Mid Cap Fund Growth, and Anant Laddha and Priya Ranjan forHDFC Banking & Financial Services Fund Regular Growth

Tata Consumer Products - Starbucks bounces back post-pandemic

Tata Consumer Products is one of the leading companies of the Tata Group, with a presence in the food and beverages business in India and internationally. It is the second largest tea company globally and has leadership in many markets.

In Q1FY23, Tata Starbucks recorded revenue growth of 238% YoY for Q1FY23, led by normalised store operations. It opened 7 new stores and entered four new cities, taking the total store count to 275. It also introduced new products such as plant-based protein products under Tata Simply Better, multiple variants of Tata Soulfull, and spices for South India under Tata Sampann, as well as honey and spreads under its Himalayan brand in Q1FY23.

Fund managers who bought shares of Tata Consumer Products

Shares of Tata Consumer Products were bought for respective schemes by Priya Ranjan and Rahul Baijal forHDFC Top 100 Fund Growth,Nippon India Tax Saver (ELSS) Fund - Growth, Kinjal Desai and Ashutosh Bhargava forNippon India Large Cap Fund - Growth and Mahesh Patil and Kunal Sangoi forAditya Birla Sun Life Focused Equity Fund Growth.

Kirloskar Pneumatic - Entry into new segment aids growth

Kirloskar Pneumatic manufactures air, refrigeration and gas compressors and systems that account for 95% of sales. It serves diverse industries such as oil, gas, steel, cement, food processing, air separation and automobiles. Its manufacturing facilities are located in Pune and Nashik.

KPCL’s entry into screw air compressors significantly improved the addressable market over the past two years. Management has indicated improving market share of air compressors. In a meeting with analysts, the management guided for a Rs 4,000–5,000 crore market for air compressors, up from their earlier target of Rs 3,300 crore.

Fund managers who bought shares of Kirloskar Pneumatic

Fund managers who added shares of Kirloskar Pneumatic include Venugopal Manghat and Vihang Naik toL&T Emerging Businesses Fund Regular Growth, R. Janakiraman and Sandeep Manam toFranklin India Smaller Companies Fund Growth, Vishal Gajwani and Nitesh Jain toAditya Birla Sun Life Small Cap Fund Growth and Sonam Udasi and Abhinav Sharma toTata Flexi Cap Fund Regular Growthschemes respectively.

Rolex Rings - Strong and sustained exports with rising orders

Rolex Rings is among the leading manufacturers of forged and machined components in India. Over the past four decades, it has garnered expertise in manufacturing transmission components, engine components, chassis components, exhaust system components, and bearing rings.

The management said that they continue to receive enquiries from existing as well as new customers as they try and de-risk their supply chains in both bearing rings as well as auto components. They say that they have still not witnessed any perceptible impact of the slowdown in the Americas or Europe, and have increased engagement with their customers to maintain revenue visibility.

Fund managers who bought shares of Rolex Rings

This small cap company saw buying interest from Vinit Sambre and Jay Kothari forDSP Small Cap Fund Regular Plan Growth, Satyabrata Mohanty forAditya Birla Sun Life Equity Advantage Fund Growth, Dhaval Shah and Satyabrata Mohanty forAditya Birla Sun Life Equity Hybrid '95 Fund Growth and Aniruddha Naha and Vivek Sharma forPGIM India Midcap Opportunities Fund Regular Growthschemes respectively

HDFC AMC - Revamped fund management  takes charge post CIO’s exit

HDFC AMC, part of the HDFC Group, is among the largest and most profitable asset management companies in India. It had an AUM (assets under management) of around Rs 4.3 lakh crore as of March 31, 2022. Being one of the early movers in the industry, its strong distribution network, with 228 branches and over 75,000 empanelled distribution partners, are its strengths. The company, however, has been losing its market share in the past few years. Over the last two months the AMC also had a change in the leadership. One of its longest serving fund managers and CIO Prashant Jain resigned and Chirag Setalvad has taken over. 

HDFC AMC was impacted by the ban on new NFOs (new fund offerings) by AMCs for a few months, which was lifted on Jul 1, 2022. With the ban lifted, it has applied for a slew of NFOs, including ETFs which have become popular with investors in recent times.

Fund managers who bought shares of HDFC AMC

Shares of HDFC AMC were added to their respective schemes by Priyanka Khandelwal and Anish Tawakley toICICI Prudential Bluechip Fund Growth, Manish Gunwani and Kinjal Desai toNippon India Flexi Cap Fund Regular Growth, Trideep Bhattacharya and Sahil Shah toEdelweiss Mid Cap Fund Growth and Priyanka Khandelwal and Anish Tawakley toICICI Prudential Business Cycle Fund Regular Growth

IDBI Capital released a report for Mutual Funds News on 14 Nov, 2022.
2057.55
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New leadership, fresh strategy at JB Chemicals sees impact in Q1FY23
By Ketan Sonalkar

Two years ago, the 45 year old company JB Chemicals and Pharmaceuticals -  which manufactures drugs, APIs (active pharmaceutical ingredients) and carries out manufacturing for other brands under its CMO (Contract Manufacturing Organization) - changed owners. The private equity giant KKR acquired a controlling stake of 54% in JB Chepharm from its promoters in July 2020. After this, KKR appointed …

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J B Chemicals & Phar.. has an average target of 2260.00 from 2 brokers.